Under Maryland law, attorneys in private practice must place all eligible client trust funds into attorney trust accounts. In some cases, though, it may be impractical for an attorney to establish a separate interest-bearing account for each individual client. Through the Interest on Lawyer Trust Accounts (IOLTA) program, attorneys can place eligible client funds into a pooled escrow account that generates interest income. The interest is then sent to Maryland Legal Services Corporation (MLSC), a non-profit established by the State of Maryland, which uses it to fund grants to programs that offer civil legal services for low-income, under-represented Marylanders.
The Maryland Rules provide that financial institutions that participate in the IOLTA program must pay interest rates on IOLTA deposits that are comparable to other similarly situated accounts. Some financial institutions are committed to increasing access to justice in their communities, however, and choose to pay higher interest rates. As it is important for the MSBA and MLSC to publicly recognize financial institutions that go above and beyond the standard, they partnered in 2002 to establish the IOLTA Honor Roll Program. The MLSC and MSBA encourage all financial institutions that pay a net yield of 1% or 65% or more of the federal funds target rate on IOLTA deposits, whichever is greater, to become Honor Roll members.
The IOLTA rules are complicated, and the penalties for failing to comply with them can be significant, which is why it is critical for attorneys to understand their duties with regard to IOLTA. Maryland attorneys that want to learn more about IOLTA accounts can seek information from Maryland Legal Services Corporation (MLSC).
Additionally, the MSBA is presenting IOLTA Management for Lawyers on Tuesday, October 25, 2022, at 11:00 am, which you can register for here. The program will discuss the specifics of IOLTA management for Maryland lawyers and the importance of knowing the rules around your IOLTA account. The presentation is free for MSBA Members as part of the Virtual Learning Pass membership benefit. Attendees will earn one hour of ethics/CLE credit for the surrounding MCLE states. If you miss the live stream, the program will be available on the MSBA CLE catalog.